Introduction: EBITDA in Singapore's SME Market

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is widely used in Singapore SME valuations because it:

✔ Standardizes profitability by removing capital structure and tax differences

✔ Aligns with regional M&A practices

✔ Enables benchmarking against industry transactions

Other methods like Discounted Cash Flow (DCF) and Asset-Based Valuation are used as complements.

---

The Gold Standard: EBITDA Multiples Valuation

Why EBITDA is Popular

1. Bankability: Lenders assess debt capacity using EBITDA
2. Deal Speed: Comparable analysis is efficient for negotiations
3. Tax Neutrality: Removes distortions from tax variations

EBITDA Adjustments

Owner Add-Backs- Non-recurring expenses / Above-market owner compensation

Working Capital Normalization- Adjust for seasonal or irregular balances

Synergy Premiums - Strategic buyers may pay premiums for synergies

Pitfall Alert

Unadjusted EBITDA can distort valuation - always normalize for accuracy.

---

Method #2: Discounted Cash Flow (DCF) - Growth-Based Valuation

When DCF is Useful

• Early-stage businesses with high growth potential
• Companies with unique assets (e.g., patents, licenses)

Key DCF Components

1. Free Cash Flow Projections

   • Revenue growth aligned with sector trends
   • Terminal value based on long-term expectations

2. Discount Rate (WACC)

   • Reflects business risk and cost of capital

Singapore Considerations

Incorporate tax incentives (e.g., partial tax exemptions)

---

Method #3: Asset-Based Valuation - Tangible Business Worth

When Assets Matter Most

• Capital-intensive industries (e.g., manufacturing, real estate)
• Distressed or liquidation scenarios

Tax Implications

• Asset sales may trigger GST
• Share sales could qualify for tax deferral

---

Conclusion: A Balanced Valuation Approach

While EBITDA is a key benchmark, combining it with DCF and asset checks provides a more complete picture.

Get an instant valuation estimate: Use our AI Valuation Tool to gauge your business worth in minutes.

For a professional valuation: Consult licensed experts familiar with Singapore's market and regulations.